North Country Hospital Fiscal Year 2021 Budget

Presentation to the Green Mountain Care

BoardAugust 26, 2020

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Introduction

Presenters

Brian Nall, President and CEO

Tracey Paul, CFO

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Introduction: Service Area

45 Minutes to Closest Critical Access Hospital

Service Area ≈ 30,000

2 Hours to Tertiary Care

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Introduction: Organizational Chart

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North Country Health Systems, Inc.Members = Department Directors,

Active Medical Staff, Persons Elected at Annual Meeting

North Country Hospital and Health Center, Inc.(dba North Country

Hospital)

Northeast Kingdom Healthcare Collaborative , LLC

Two Members:North Country Hospital and Health Center,

Inc.Northeastern Vermont Regional Hospital, Inc.

North Country Health Services, Inc.

(dba Derby Green Nursing Home)

Closed 05/01/20

YEAR-OVER-YEARRECONCILIATION

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North Country HospitalBrian Nall Tracey Paul

Fiscal Year 2021 Budget Analysis GMCB Data Entry Hospital Data Entry

INCOME STATEMENT 2019 A 2020 B 1st Qtr FY20 2nd Qtr FY20 3rd Qtr FY20 4th Qtr FY20 Projected 2020 PROJ 2021 B 2019A-2020P 2020B-2020P 2020B-2021B 2020P-2021B

RevenuesGross Patient Care Revenue $191,002,248 $199,661,481 $48,256,132 $47,110,906 $38,058,491 $44,475,177 $177,900,706 $202,715,312 -6.9% -10.9% 1.5% 13.9%

Disproportionate Share Payments $886,086 $906,720 $226,679 $226,678 $195,187 $216,181 $864,725 $906,713 -2.4% -4.6% -0.0% 4.9%Graduate Medical Education (UVMMC only) $0 $0 $0 $0 $0 $0 $0 $0 #DIV/0! #DIV/0! #DIV/0! #DIV/0!

Bad Debt -$3,582,373 -$4,491,912 -$992,692 -$664,863 -$1,266,229 -$974,595 -$3,898,379 -$3,063,212 8.8% -13.2% -31.8% -21.4%Free Care -$1,562,324 -$1,826,157 -$416,800 -$400,798 -$228,861 -$348,820 -$1,395,279 -$1,754,951 -10.7% -23.6% -3.9% 25.8%

Deductions from Revenue -$112,251,783 -$116,876,281 -$28,802,027 -$29,424,845 -$22,652,665 -$26,359,846 -$107,239,383 -$123,101,957 -4.5% -8.2% 5.3% 14.8%Net Patient Care Revenue $74,491,854 $77,373,851 $18,271,292 $16,847,078 $14,105,923 $17,008,097 $66,232,390 $75,701,905 -11.1% -14.4% -2.2% 14.3%Fixed Prospective Payments, Reserves & Other

Fixed Prospective Payments $6,143,063 $6,249,398 $1,301,122 $2,441,659 $2,120,579 $1,954,453 $7,817,813 $7,035,060 27.3% 25.1% 12.6% -10.0%Reserves $0 $0 #DIV/0! #DIV/0! #DIV/0! #DIV/0!

Other Reform Payments $0 $0 #DIV/0! #DIV/0! #DIV/0! #DIV/0!Fixed Prospective Payments, Reserves & Other $6,143,063 $6,249,398 $1,301,122 $2,441,659 $2,120,579 $1,954,453 $7,817,813 $7,035,060 27.3% 25.1% 12.6% -10.0%Total NPR & FPP $80,634,917 $83,623,249 $19,572,414 $19,288,737 $16,226,502 $18,962,550 $74,050,203 $82,736,965 -8.2% -11.4% -1.1% 11.7%

COVID-19 Stimulus and Other Grant Funding $0 $0 $4,328,238 $0 $4,328,238 $0 #DIV/0! #DIV/0! #DIV/0!Other $7,039,780 $6,477,173 $2,215,333 $1,523,239 $1,745,727 $1,828,100 $7,312,399 $7,649,920 3.9% 12.9% 18.1% 4.6%

Other Operating Revenue $7,039,780 $6,477,173 $2,215,333 $1,523,239 $6,073,965 $1,828,100 $11,640,637 $7,649,920 65.4% 79.7% 18.1% -34.3%Total Operating Revenue $87,674,697 $90,100,422 $21,787,747 $20,811,976 $22,300,467 $20,790,650 $85,690,840 $90,386,885 -2.3% -4.9% 0.3% 5.5%Expenses

Salaries, Fringe Benefits, Physician Fees, Contracts $51,070,374 $52,284,770 $14,274,156 $14,403,015 $12,661,179 $13,779,450 $55,117,800 $55,410,287 7.9% 5.4% 6.0% 0.5%Medical/Surgical Drugs and Supplies $0 $0 $0 $0 $0 $0 $0 $0 #DIV/0! #DIV/0! #DIV/0! #DIV/0!

Health Care Provider Tax $4,555,652 $4,692,876 $1,173,219 $1,173,219 $1,265,291 $1,203,910 $4,815,639 $4,880,591 5.7% 2.6% 4.0% 1.3%Depreciation/Amortization $4,141,025 $4,428,744 $992,270 $1,064,948 $897,927 $983,237 $3,938,382 $3,895,786 -4.9% -11.1% -12.0% -1.1%

Interest - Short and Long Term $627,738 $630,261 $137,698 $140,588 $145,998 $141,428 $565,712 $588,924 -9.9% -10.2% -6.6% 4.1%Other Operating Expenses (includes ACO Participation Fees) $25,602,961 $26,591,830 $4,935,012 $5,263,252 $4,379,785 $4,861,161 $19,439,210 $24,058,512 -24.1% -26.9% -9.5% 23.8%

Operating Expense $85,997,751 $88,628,481 $21,512,355 $22,045,022 $19,350,180 $20,969,186 $83,876,743 $88,834,100 -2.5% -5.4% 0.2% 5.9%

Net Operating Income $1,676,946 $1,471,941 $275,392 -$1,233,046 $2,950,287 -$178,536 $1,814,097 $1,552,785 8.2% 23.2% 5.5% -14.4%

Non Operating Revenue $940,204 $1,351,149 $9,497,602 $200,449 -$168,944 $82,752 $9,653,237 $586,599 926.7% 614.4% -56.6% -93.9%

Excess (Deficit) of Rev over Exp $2,617,150 $2,823,090 $9,772,994 -$1,032,597 $2,781,343 -$95,784 $11,467,333 $2,139,384 338.2% 306.2% -24.2% -81.3%

Income Statement MetricsOperating Margin % 1.9% 1.6% 1.3% -5.9% 13.2% -0.9% 2.1% 1.7%

Total Margin % 3.0% 3.1% 31.2% -4.9% 12.6% -0.5% 12.0% 2.4%

Fee increase on Gross Revenues 3.60% Overall fee increase

Net Revenue (NPR) Decrease of 1.00%

NPR and FPP

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Budget FY20 to Budget FY21

Other operating revenue -18.10% increase = $1.1M

Non operating revenue – 56.60% decrease = -$764,550

Other Operating and Non operating revenue

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Operating Expenses

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85,997,752 88,628,481

83,876,743

88,834,100

40,000,000

45,000,000

50,000,000

55,000,000

60,000,000

65,000,000

70,000,000

75,000,000

80,000,000

85,000,000

90,000,000

FY2019 Actual FY2020 Budget FY2020 Projected FY2021 Budget

Total Operating Expenses

Expense Drivers: Compensation and Benefits Locums/Travelers Covid related costs Furlough of staff

Operating Expenses

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Operating Expenses

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62.64%

69.33%

61.39%

69.54%65.32%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

FY2019 Actual FYTD June 2020 FY2020 Budget FY2020 Projected FY2021 Budget

Compensation/Benefits/Locums% of Total Expenses

Operating Expenses

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3.26%3.62%

2.39%

3.82%

2.94%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

FY2019 Actual FYTD June 2020 FY2020 Budget FY2020 Projected FY2021 Budget

Locum Expense % of Total Expenses

28.14% 28.67% 27.48% 25.80%29.82%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

FY2019 Actual FYTD June 2020 FY2020 Budget FY2020 Projected FY2021 Budget

Physician to Total Salaries

Operating Margin

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(1,800,000)

(1,300,000)

(800,000)

(300,000)

200,000

700,000

1,200,000

1,700,000

2,200,000

10/31/2019 11/30/2019 12/31/2019 01/31/2020 02/29/2020 03/31/2020 04/30/2020 05/31/2020 06/30/2020 07/31/2020 08/31/2020 09/30/2020

NCH Operating Margin YTD Gain/(Loss) Actual and Budget

Actual Budget

Operating Margin

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(2,200,000)

(1,700,000)

(1,200,000)

(700,000)

(200,000)

300,000

800,000

10/31/2019 11/30/2019 12/31/2019 01/31/2020 02/29/2020 03/31/2020 04/30/2020 05/31/2020 06/30/2020 07/31/2020 08/31/2020 09/30/2020

NCH Operating Margin YTD Gain/(Loss) Actual and Budget without CARES Act Funds

Actual without CARES Act Funds Budget

Operating Margin

Ensure Continued Financial & Operational Sustainability

Operating Margins

YTD June 2020 Actual $1.9 M = 3.00% YTD June 2020 Budget $1.30 M = 2.00%

Budget FY2020 $1.5 M = 1.6%

FY2020 Projected $1.8 M = 2.1%

FY2021 Budget $1.5 M = 1.7%

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Balance Sheet

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North Country Hospital

Fiscal Year 2021 Budget Analysis GMCB Data Entry Hospital Data Entry

BALANCE SHEET 2019 A 2020 B 2020 PROJ 2021 B 2019A-2020P

2020B-2020P

2020B-2021B

2020P-2021B

Cash & Investments $2,700,132 $3,280,300 $16,000,000 $2,060,094 492.6% 387.8% -37.2% -87.1%Net Patient Accounts Receivable $6,639,926 $8,045,757 $7,300,000 $7,300,000 9.9% -9.3% -9.3% 0.0%

ACO Risk Reserve/Settlement Receivable $0 $0 #DIV/0! #DIV/0! #DIV/0! #DIV/0!

Other Current Assets $4,095,408 $6,110,360 $4,500,000 $4,500,000 9.9% -26.4% -26.4% 0.0%Current Assets $13,435,465 $17,436,417 $27,800,000 $13,860,094 106.9% 59.4% -20.5% -50.1%

#DIV/0! #DIV/0! #DIV/0! #DIV/0!Board Designated Assets $46,742,453 $43,266,027 $45,000,000 $47,200,000 -3.7% 4.0% 9.1% 4.9%

Net, Property, Plant And Equipment $22,280,725 $24,032,654 $19,000,000 $21,500,000 -14.7% -20.9% -10.5% 13.2%Other Long-Term Assets $4,060,388 $4,667,263 $3,200,000 $3,200,000 -21.2% -31.4% -31.4% 0.0%

Assets $86,519,032 $89,402,361 $95,000,000 $85,760,094 9.8% 6.3% -4.1% -9.7%#DIV/0! #DIV/0! #DIV/0! #DIV/0!

Accounts Payable $2,616,612 $1,408,597 $2,100,000 $2,100,000 -19.7% 49.1% 49.1% 0.0%Salaries, Wages And Payroll Taxes

Payable $4,634,970 $4,945,262 $3,900,000 $3,900,000 -15.9% -21.1% -21.1% 0.0%ACO Risk Reserve/Settlement Payable $0 $0 $812,000 $812,000 #DIV/0! #DIV/0! #DIV/0! 0.0%

COVID-19 Funding Short-Term Liabilities $9,300,155 $0 #DIV/0! #DIV/0! #DIV/0! -100.0%Other Current Liabilities $6,078,671 $9,398,243 $5,600,000 $5,600,000 -7.9% -40.4% -40.4% 0.0%

Current Liabilities $13,330,253 $15,752,102 $21,712,155 $12,412,000 62.9% 37.8% -21.2% -42.8%#DIV/0! #DIV/0! #DIV/0! #DIV/0!

Long Term Liabilities $17,582,747 $15,893,196 $17,200,000 $17,200,000 -2.2% 8.2% 8.2% 0.0%Other Noncurrent Liabilities $0 $0 $0 #DIV/0! #DIV/0! #DIV/0! #DIV/0!

COVID-19 Funding Long-Term Liabilities #DIV/0! #DIV/0! #DIV/0! #DIV/0!Fund Balance $55,404,693 $57,757,063 $56,087,845 $56,148,094 1.2% -2.9% -2.8% 0.1%

Liabilities and Equities $86,317,693 $89,402,361 $95,000,000 $85,760,094 10.1% 6.3% -4.1% -9.7%

Balance Sheet Metrics Change in Points Days Cash on Hand 220.5 201.8 228.6 -220.5 -201.8 26.8 228.6

Days Cash on Hand-COVID-19 0.0 0.0 0.0 0.0 Debt Service Coverage Ratio 3.6 3.4 6.0 -3.4 -3.6 2.6 6.0

Long Term Debt to Capitalization 0.2 0.2 0.2 -0.2 -0.2 -0.0 0.2 Days Payable 59.4 68.3 16.0 -68.3 -59.4 -52.3 16.0

Days Receivable 32.5 38.0 38.4 -38.0 -32.5 0.4 38.4

Cash Flow Summary

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2,700,132 3,280,300

16,000,000

20,622,056

2,060,094

-

5,000,000

10,000,000

15,000,000

20,000,000

FY2019 Actual FY2020 Budget FY2020 Projected YTD June FY2020 FY2021 Budget

NCH Cash Flow - Cash Balance

Charge increase request = 3.60%

Charge increase effect on payers: Medicare Medicaid Commercial

Effect on bad debt and free care

Change-in-Charge Request

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Service Line Adjustments

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Service Line Changes from Budget 20

Neurology Cardiology Opthamology

Risks and Opportunities

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Pre Covid February YTD 2020 =

Operating margin - $700,000/ 1.90%Budget = $310,316 / 1.00%

Risks and Opportunities

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Covid – March to May 20% - 50% loss in revenue 80% telemedicine visits 200 staff furloughed 25% staff worked from home Physician and leaders voluntary wage

decrease – 10% - 20%

5 – Risks and Opportunities

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Covid - March to May cont. Stand up Covid testing ( Orleans/Essex

Counites) Entry Screeners – staff and public Daily Incident Command Finalized Derby Green closure

Risks and Opportunities

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Covid – June to July Return of furloughed staff Telemedicine visits at 10% Discontinued voluntary wage decrease Hired entry screeners Planning for Fall

5 – Risks and Opportunities

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August and beyond Generating healthy margins for reinvestment

into the organization Recruit and retain workforce Adaptive Active Mangement Uncertainty of Covid 19 impact on Fall

Capital InvestmentCycle

FY 2020 Capital Budget = $3.6M• Funded Through Operating Cash• Medical Equipment 65% of spend• Technology 25% of spend• Facilities 10% of spend

Lab Renovations ?

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Questions and Answers

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